In order to defray the costs of health care, individuals, families, and other entities (such as employers) routinely purchase health insurance policies, certificates or contracts (individually or collectively a “policy”). Generally, health insurance policies provide that, in exchange for the policyholder's payment of a premium, the health insurance company will cover some or all of the health care costs incurred by the individuals covered under the policy.
Other types of insurance coverage, such as life and property insurance function in similar fashion, wherein the policyholder pays a premium and the insurance company covers some or all of the costs insured under the terms of the policy.
It is not unusual for individuals, families and other entities to change insurance coverage over time. For example, an individual may purchase a first health insurance policy to obtain coverage when the individual becomes a legal adult and is no longer covered under his or her parents' insurance policy. Later, the individual may become employed and obtain health insurance coverage under the employer's policy. Subsequently, the individual may change jobs, move to another location, or make other changes that necessitate or make desirable yet another change in health insurance policies. Similar changes may occur in the individual's other types of insurance policies, such as life and property insurance.
Typically, when an insured entity, such as an individual, family or company, switches insurance carriers or policies, the insured entity cancels the previous insurance policy to avoid paying unnecessary and duplicative insurance premiums. However, as time passes, the entity's circumstances may change. For example, a single healthy adult age 25 may purchase a health insurance policy. The adult may then get a job and obtain health insurance through the employer. Over time, the individual may get married, have children, or develop a chronic or other health condition. The individual may then cease to work for the employer, leaving the individual with only extremely expensive or no health insurance options, during the COBRA term or after COBRA has expired.
In view of this and other situations in which an insured entity's circumstances and insurance needs vary over time, there is a need for a policy that provides flexibility in coverage to the policyholder as the insurance needs of the policyholder vary.